Investing

College graduates who recently received their diplomas may be dreading the next milestone: the start of their federal student loan payments.
Here’s what borrowers should know.

Andresr | E+ | Getty Images

College graduates who recently received their diplomas may be dreading the next milestone: the start of their federal student loan payments.
Each year, roughly 2 million people in the U.S. are awarded a bachelor’s degree, according to an analysis by higher education expert Mark Kantrowitz. Roughly 60%, or 1.2 million of those students, will also have student debt, he said.

Here’s what new college graduates should know about the loan bills.

Bill likely won’t be due for six months

In most cases, you likely won’t have to make your first student loan payment until six months after you graduate, thanks to the federal government’s grace period, Kantrowitz said. Those with federal Perkins Loans can get up to nine months, he added.
If your loans are subsidized, the government will pay the interest on your loans during that period, Kantrowitz said. Meanwhile, interest will accrue on unsubsidized loans.
More from Personal Finance:Average 401(k) savings rates recently hit a record — here’s what experts suggestInvestor home purchases jump for the first time in two years5 ways to maximize your vacation days
Some borrowers may miss their first payment due date after the grace period, Kantrowitz said. To avoid that, he recommends putting a reminder in your calendar for about two weeks before repayment starts.

Some people may want to sign up for automatic payments with their student loan servicer, which can lead to a small reduction of your interest rate in addition to reassurance that you won’t get dinged with a late payment. Before you do so, just make sure your monthly bill calculated by your lender is correct.

You’ll have options if you’re worried

“The best way to reduce stress about student debt is to educate yourself as to how the loans work,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that helps borrowers navigate repayment.
Fortunately, the federal government has many options for borrowers worried about being able to afford their bill. Its income-driven repayment, or IDR, plans, for example, cap your monthly payment at a share of your discretionary income.
The Biden administration recently introduced a new IDR plan under which borrowers need to pay just 5% of their earnings after calculated expenses. That option is the Saving on a Valuable Education, or SAVE, plan.

To determine how much your monthly bill would be under different plans, use one of the calculators at Studentaid.gov or FreeStudentLoanAdvice.org.
“Borrowers should choose the repayment plan with the highest monthly payment they can afford,” Kantrowitz said. “This will pay off the debt quicker and reduce the total interest paid over the life of the loan.”

For those who need to prolong their grace period, there are deferments and forbearances, including ones for those who are unemployed or in an eligible graduate school fellowship. Just keep in mind that during some of these breaks, interest will accrue on your debt and you’ll face larger payments down the line.
Mayotte, of The Institute of Student Loan Advisors, also recommends that borrowers research whether they’re eligible for any forgiveness programs. The institute’s website, FreeStudentLoanAdvice.org, has a database of such opportunities, she said. More

Remote work surged in the early days of the Covid-19 pandemic.
The trend has staying power. Workers value working from home and companies profit from the arrangement.
One study found large U.S. firms use remote work as a scapegoat for poor financial performance.

Justin Paget | Digitalvision | Getty Images

The work-from-home trend is here to stay.
Many companies have continued to let employees work remotely for at least some of the workweek — four years on from the early days of the Covid-19 pandemic — due to the win-win nature of the arrangement: Remote work is more profitable for companies and highly valued by employees, according to labor economists.

While some companies have issued return-to-office mandates, they’re the exception. The five-day, in-office workweek is antiquated for a large share of workers, a relic of the pre-pandemic job market.

“Remote work is not going away,” said Nick Bloom, an economics professor at Stanford University who studies workplace management practices.
“In fact, if you look five years out, I think it will be higher than it is now,” he said.

One of the pandemic’s ‘most enduring legacies’

Working from home was relatively rare prior to 2020. At that time, less than 10% of paid workdays were from home, according to WFH Research.
The share swelled to more than 60% as Covid-19 lockdowns pushed people indoors, then gradually decreased as employers called workers back to the office, mostly just a few days a week in so-called hybrid arrangements.

More from Personal Finance:Job market is strong but has gotten more competitiveWhy job skills could make or break your next interviewWhy the minimum wage doesn’t budge despite inflation
However, the number of days worked from home isn’t declining anymore; it has held steady since early 2023 at about 25%, more than triple the pre-Covid rate.
The rise of remote work “is probably going to be one of the most enduring legacies” of the pandemic-era U.S. labor market, said Nick Bunker, director of North American economic research at job site Indeed.
The days of full-time in-office work “are gone,” he said.

Why remote work has stuck

Martin-dm | E+ | Getty Images

Of course, about half of all jobs — like those in service, accommodation and retail — can’t be done from home at all, Bloom said.
Of those that can be worked from home — such as many finance and technology jobs, for example — about 41% are hybrid and 20% are fully remote.
Remote work is “highly profitable” for companies, which is primarily why the trend has stuck, Bloom said.
The big upside is it reduces employee turnover rate by about a third. That’s because workers value remote work, so they tend to quit less often, Bloom said.

Remote work is not going away.

Nick Bloom
economics professor at Stanford University

His research suggests workers value hybrid work about the same as an 8% raise. A return-to-office mandate would require a commensurate pay increase to avoid attrition, he said.
Companies don’t have to spend as much on hiring, recruitment and training if they lose staff less frequently, he said. One company told Bloom that it costs the firm about $20,000 each time a worker quits.
Employers can also cut costs via the need for less office space and can broaden their recruitment pool to all geographic areas of the U.S. — potentially to areas where the cost of living is lower and they may be able to pay lower relative wages, Bunker said.

‘Firms care about profits, not productivity’

In addition, hybrid work doesn’t appear to have any negative impact on workers’ productivity, Bloom said.
Ultimately, “firms care about profits, not productivity,” Bloom said. “What makes money in a capitalist economy tends to stick.”
About 8% of all online job postings in the U.S. advertised the role as remote or hybrid, according to Indeed data as of May 2024. While down from a pandemic-era peak of around 10% in early 2022, it’s still “far above” the roughly 2% to 2.5% before the pandemic, Bunker said.

That recent decline is partly attributable to a pullback in job ads among some struggling sectors such as software development that tend to advertise remote roles rather than a broad-based throttling back of remote-work opportunities by employers, Bunker said.
When people have the chance to work flexibly, 87% of them take the opportunity, according to a 2022 survey by the consulting firm McKinsey.
“Job seekers really want it,” and employers feel they need to offer the benefit to stay competitive, Bunker said.

Why some companies are forcing a return to office

Of course, not all firms allow employees to work from home: About 38% of employees who can do their jobs from home are required to work full-time in the office, according to WFH Research data as of May 2024.
Such employees tended to be older or work at older companies that were started decades ago, it found.
Many companies point to downsides to remote work, including a reduced ability to observe and monitor employees and reduced peer mentoring, cited by 45% and 42% of employers, respectively, according to a 2023 ZipRecruiter survey.
However, a January study from the University of Pittsburgh found that large U.S. companies imposing return-to-office mandates did so in order to “scapegoat” remote work for poor company performance — not because working full-time in the office boosted the firm’s values.
The study found “significant declines” in worker job satisfaction without a big change in financial performance or firm values.

But outside of “struggling” companies, it’s rare for employers to force people back to the office full-time. To that point, 90% of professionals and managers in the U.S. now work from home at least one day a week, he said.
In general, evidence suggests remote work benefits employees, firms and society at large, with advantages such as reducing pollution from commuting and letting parents spend more time with their kids, Bloom said.
“It’s like a triple win,” he said. “And it’s really hard to think of something [else] that is that beneficial.” More

Generation X often must manage financial commitments to adult children and aging parents, in addition to their own current needs and goals.
While this generation is experiencing peak incomes, they also have significant student loan debt, high debt in general and low confidence in their retirement prospects.
There are some steps you can take to ease your stress level and feel more financially secure.

Ippei Naoi | Moment | Getty Images

Generation X is known as the sandwich generation because they sit between having a combination of financial or emotional responsibility for adult children and aging parents — in addition to managing their own current lifestyle aspirations and securing their retirement future.
It’s a lot to deal with, and Gen X can struggle with juggling life and finances across multiple responsibilities.

But there are some steps Gen Xers can take to ease some of the stress and feel more financially secure:

Align your life and money with purpose, giving your money assignments you connect with.
Own your preferences for the life you want now and in your future retirement.
Find confidence in planning your finances with a professional.

These steps give you the confidence to feel more secure and bring soul to your finances. 

More from CNBC’s Advisor Council

Finances of ‘the forgotten generation’

Gen Xers have earned other nicknames, such as latchkey kids and the forgotten generation.
Because people in this generation typically experienced both parents working while they were young, they became familiar with coming home to empty houses and learning resiliency in their parents’ absence, sometimes feeling forgotten.
Meanwhile, there is great wealth transfer of up to $90 trillion coming from the baby boomers over the next 20 to 30 years, and fanfare is all about wealth for the millennials. Alas, the forgotten! In many families, the transfer must come through Gen X first.

Here’s the rub: Gen X is experiencing peak incomes — households age 44-54 (which encompasses much of this generation), have a median income of $101,500, the highest across all age groups, according to Statista.
But they also have average student loan debt of slightly more than $40,000, high debt in general and the least confidence in their retirement prospects. A 2023 Schroders report revealed 61% of Gen X don’t feel good about the prospects of achieving their dream retirement goals and 45% don’t have a retirement plan at all.

In a 2023 survey from Experian, Gen X respondents were most likely among the four adult generations to report experiencing financial trauma, which is emotional distress derived from objective and subjective traumatic events, past or present. Financial trauma shapes relationships with money that affect engagement, perspectives, and outcomes with finances.
About three-quarters (74%) of Gen X reported financial trauma, compared to 71% of millennials, 63% of boomers and  64% of Generation Z.
So how can Gen X feel more confident about their current and future finances?
While it may seem grim at times, first, give yourself grace. Second, Gen X must believe that they can secure their future selves without depriving their current selves. Smoothing the struggle of the juggle is knowing that with intentional financial life planning, the current and future lifestyle divide doesn’t have to be that way. It can be “and,” not “or.”
Here are some strategies that can help.

‘Catch up’ on your retirement savings

In more ways than one, there’s life after 50. For workers with access to a traditional or Roth 401(k) plan, in 2024, you can make employee-based contributions of $23,000. When you reach the age of 50 and older, you can make additional “catch-up” contributions of $7,500, bringing your total to $30,500.
To power-save, make additional after-tax contributions if your plan allows, which brings you up to as much as $69,000 for the year, or $76,500 with the catch-up.

Diversify your investment account balances

Employer-sponsored retirement accounts such as 401(k) plans or 403(b)s and individual retirement accounts have something in common: The word retirement is the account’s intended long-term goal. Many folks and advisors gripe that their money is “locked up” until the penalty-free withdrawal age of 59½.
For flexibility, consider partnering your tax-deferred investment accounts with taxable brokerage accounts that do not have an age penalty, only short- or long-term capital gains tax, with the preference being on the lower long-term tax rate.

Having account flexibility allows you to fund current needs and retirement simultaneously without income threshold restriction or penalty. Additionally, your assets in a taxable brokerage account receive a “step-up” in basis at death. This could lead to higher valuation and thus reduce capital gains tax for heirs. 

Set financial boundaries with family  

One key struggle of the sandwich generation juggle is permitting yourself to prioritize your self- and financial care while keeping aligned with your value system to care for your loved ones.
Sure, stay true to your cultures and values in wanting to provide financial help for your adult children and a community, cross-generational care approach to your aging parents. But you also need to be attentive to your own financial well-being.
It’s may be a cliche, but put your oxygen mask on first. Basically, find ways to secure your own issues before assisting others.
To that point, have life and money conversations with your adult children and aging parents about what help you can afford to offer.

Work with financial professionals 

Being latchkey kids and often feeling forgotten contribute to Gen X’s natural skepticism, lacking trust until proven or earned.
While 65% of affluent millennials trust financial advisors, somewhat fewer, 58%, of affluent Gen X feel the same way, according to Investopedia’s Affluent Millennial Investing Survey. Proven or earned trust shows up in Northwestern Mutual’s 2023 Planning & Progress Study, where 50% of Gen X say they value financial advisors with expertise they don’t have, and 58% point to an advisor’s track record of experience.
With Gen X, it’s particularly important to be connected with and thus understood by their advisor, and offered sound financial advice they can use.
Don’t focus on seeking financial advice. Instead, unlock a relationship with a financial professional by seeking a referral from a trusted source. Or take a trust-but-verify approach by leaning into professionals’ social imprint, expertise and services.
 — By Preston D. Cherry, a certified financial planner and the founder and president of Concurrent Financial Planning in Green Bay, Wisconsin. He is also a member of the CNBC Financial Advisor Council. More

If you max out your 401(k) early in the year, you could miss part of your employer match, experts say.
But some 401(k) plans offer a “true-up,” or additional deposit of the remaining employer match if you max out contributions before year-end.
You should review your plan documents before setting up 401(k) deferrals, especially if you want to front-load contributions.

Sally Anscombe | Moment | Getty Images

When saving for retirement, investing sooner typically boosts growth over time. But you can lose money by maxing out your 401(k) too early in the year — unless the plan has a special feature.
Most 401(k) plans offer an employer match, which uses a formula to deposit extra money into the account, based on your deferrals. Typically, you must contribute at least a certain percentage of income each paycheck to receive the year’s full employer match.

However, some 401(k) plans offer a “true-up,” or additional deposit of the remaining employer match, for employees who max out contributions before the end of the year.
More from Personal Finance:Average 401(k) savings rates recently hit a record — here’s what experts suggestInvestor home purchases jump for the first time in two years5 ways to maximize your vacation days
“It’s an awesome perk,” but not all 401(k) plans offer a true-up, said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
To that point, roughly 67% of plans that offer matches more than annually had a true-up in 2022, according to the Plan Sponsor Council of America’s latest annual survey. It’s typically most common in bigger plans, experts say.

No true-up can be an ‘absolute nightmare’

When a 401(k) doesn’t have a true-up, “it’s an absolute nightmare” because employees can easily miss part of the company match, Lucas said. 

For example, let’s say you’re under age 50, making $200,000 per year, and your company offers a 5% 401(k) match without a true-up.
With 26 pay periods and a 20% contribution rate, you’ll reach the $23,000 employee deferral limit for 2024 after 15 paychecks and only receive about $5,800 of your employer match. 
In this scenario, you’d miss about $4,200 of your remaining 5% employer match by maxing out the plan early, according to Lucas. That missed $4,200 could be worth tens of thousands more in future growth.   
Typically, you can avoid the issue by equally spreading out contributions throughout the year, but you need to monitor changes, such as raises or bonuses, he said.

Review your summary plan description

Before setting your 401(k) deferrals, it’s important to know whether your plan has a true-up, experts say.
“That’s one of the things we investigate,” said CFP Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts.
Typically, the best place to look is the “contributions” section of your 401(k) summary plan description, which may or may not mention the feature, he said.
“It’s never going to say, ‘This plan does not have a true-up,'” Galli said. But you can double-check with your company’s human resources department to confirm, which may prompt the company to add a true-up feature in the future. More

Job openings declined to a roughly three-year low in April, according to the Bureau of Labor Statistics.
The labor market is still strong, characterized by low layoffs and unemployment, economists said.
However, job applicants should be prepared for a more challenging hiring environment than in 2021 and 2022.

SDI Productions | E+ | Getty Images

A gradual cooling of the labor market has made it tougher to find a new job, but overall conditions are still favorable for job seekers.
“Things have gotten competitive,” said Julia Pollak, chief economist at ZipRecruiter.

“Don’t get discouraged; there are opportunities out there,” she added. “This is still a strong labor market.”

Signs of a cooling labor market

National job openings in April fell to their lowest level in more than three years, the U.S. Bureau of Labor Statistics reported Tuesday.
Job openings are a barometer of employer demand for labor. They declined by 296,000 during the month to about 8.1 million, the least since February 2021, signaling a potential weakening in the job market.
Meanwhile, there were about 1.2 job openings per unemployed worker in April, down from a ratio of 2:1 about two years ago.
More from Personal Finance:Hiring stays strong for low earners, Vanguard findsWhy job skills could make or break your next interviewWhy the minimum wage doesn’t budge despite inflation

April’s ratio is back to its pre-pandemic level, Jason Furman, an economics professor at Harvard University and former chair of the White House Council of Economic Advisers, wrote on X.
The hiring rate has also gradually fallen to below its pre-pandemic level, as has the quits rate, a gauge of workers’ sentiment about their job prospects, according to BLS data. Both were unchanged in April, though.
“The reduction in quits [and] hires alike likely explains why some feel the job market is sluggish [and] especially tough for new/returning workers,” Daniel Zhao, lead economist on Glassdoor’s economic research team, wrote on X.
Overall, labor data points to a “trajectory of modest cooling,” Zhao said.

But there’s strength, too

The job market has slackened from red-hot levels in 2021 and 2022, when metrics like job openings and turnover hit unprecedented heights, a period that came to be known as the “great resignation.”
The U.S. Federal Reserve raised borrowing costs to pump the brakes on the economy and labor market, ultimately to throttle back inflation.
Labor data on Tuesday “provided further evidence of normalization” toward a pre-pandemic baseline, Thomas Ryan, a North America economist at Capital Economics, wrote in a research note.
The labor market that directly preceded the Covid-19 pandemic is generally lauded by economists as a historically strong one for workers, characterized by low unemployment, solid wage growth and one of relatively good job opportunities.

There are indicators the U.S. job market remains strong and resilient despite headwinds, economists said.
For one, total job openings still exceed their pre-pandemic peak. The layoff rate has largely hovered at historical lows for more than three years. The national unemployment rate has been below 4% — a level indicating historical labor market strength — since February 2022. Workers’ pay raises have beaten inflation — meaning their buying power has increased — for the past year. And there are pockets of strength in hiring, as in industry sectors that employ lower-wage workers, for example.
Workers may feel disappointed by the current state of affairs due to their recent memory of a gangbusters job market, however, economists said.
“2021 may have felt fantastic for jobseekers, but it’s not the way things worked before and it’s not the way things will be forever,” said Pollak of ZipRecruiter.
The current job market is more sustainable, she said. A gradual cooling may also help influence the Federal Reserve to soon start lowering borrowing costs for consumers.

Be prepared for more competition

Job seekers should be prepared for a somewhat more challenging experience, such as a 10% to 20% increase in applicants for many job listings, Pollak said.
They should be sure to apply to jobs on a frequent basis, put their “best foot forward” and keep in mind that employers generally only look at resumes they receive within the first few days to one week, she said.
“You may not be wined and dined [by employers] quite the same way,” she added. “You may need to search a little harder and longer, but there are good matches being formed in this labor market, and they’re pretty stable.”

Don’t miss these exclusives from CNBC PRO More

When TikToker Megan Boni sang about trying to find a “man in finance” with a “trust fund,” the world took notice.
However, landing a Wall Street “finance bro” does not guarantee financial security, some experts say. In fact, it can come with risks.
If you plan to wed, a prenuptial agreement can provide a level of protection for both parties.

Finance bros are having a moment.
Just ask content creator Megan Boni, who posted a clip from her account @girl_on_couch on April 30 hashing out a new song. The lyrics are simply: “I’m looking for a man in finance, trust fund, 6’5″, blue eyes…” Her 20-second video has more than 38 million views and counting.

A representative for Boni did not immediately respond to a request for comment from CNBC, but Boni recently told People that the song was intended to poke fun at women who complained about being single but also had high expectations for potential partners.
“It was just making fun of that,” she said.
According to “Fair Play” author Eve Rodsky, “You can joke about things if they don’t feel serious to you, but it’s sort of like joking about reproductive rights.”
“It comes back to not understanding our history,” Rodsky said.
More from Personal Finance:The rise of the ‘tradwife’Taylor Swift’s new song resonates with working womenDon’t be so quick to take money advice from TikTok

Still, there are many reasons why the lyrics resonated with millions of TikTok users.
“We’ve heard so much about how bad the dating apps are, how dire the dating landscape is,” said Casey Lewis, a social media trend expert and founder of trend newsletter After School.
“There are a lot of single women who are looking but not finding what they want,” Lewis added.

‘Lock down a man in finance, then you’re kind of made’

The search for a wealthy “finance guy” comes at a time when more women report feelings of frustration and financial vulnerability.
“There’s this feeling that no matter how hard women work … we’re still barely making ends meet,” Lewis said.
Although women are achieving increasing levels of education and representation in senior leadership positions at work, they still earn just 84 cents for every dollar earned by men, according to an analysis of U.S. Census Bureau data by the National Women’s Law Center. It’s a dynamic that has shown no significant signs of improvement in decades.
“There’s this sort of feeling like, ‘If I just lock down a man in finance,'” Lewis said, “then you’re kind of made.”
“The finance guy can probably take care of you and shower you with nice things — it’s appealing,” she added.

A return to traditional gender roles

The idea of seeking out a finance man comes on the heels of TikTok’s “tradwife” and “stay-at-home girlfriend” trends, which also glamorize a return to traditional gender roles and stereotypes.
However, landing a Wall Street-type does not guarantee financial security, Rodsky said. “When you enter an arrangement like this, you are taking a huge economic risk,” Rodsky said.
Once you have ceded power, and your partner has the economic advantage, you are especially vulnerable, she explained. “There is often a misalignment of expectations,” Rodsky added.
So “if you are going to do it, do it with a prenup or postnup,” she said.

‘Prenuptial agreements can get very dicey’

If you plan to wed, it may be worth determining how you and your spouse would each protect your assets and financial interests in case you end up going your separate ways.
And if it’s “the man in finance with a trust fund,” he and his family will likely have a greater interest in protecting the family wealth — as well as the resources to make sure the agreement reflects that, said Heather Boneparth, a writer and former corporate attorney who now runs business affairs for Bone Fide Wealth, a wealth management firm based in New York City.
“It’s not nefarious and doesn’t mean they are trying to pull one over on you; it’s just probably the truth,” Boneparth said.
Having your own legal representation from a separate firm will help you negotiate the contract and meet your needs without a conflict of interest, said Kelly Schwab, a family and matrimonial attorney at Chemtob, Moss, Forman and Beyda, LLP in New York City.
“It’s not a joint venture. Prenuptial agreements can get very dicey,” Schwab said.

If handled wisely, you can use the prenup as a level of protection by including certain guardrails, such as an equalization clause, which requires one spouse to pay the other a fixed amount should they divorce, said Julia Rodgers, a family attorney, co-founder and CEO of HelloPrenup, an online platform for affordable prenup agreements.
Overall, “you need to fully understand and feel comfortable with what you’re signing,” said Boneparth.

Marriage is ‘also an economic arrangement’

For better or worse, money plays a big role in most relationships.
“Marriage is a union of love, but it’s also an economic arrangement,” said Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York.
And regardless of who has greater financial resources or earning capacity, both partners should be involved in decisions about money, said Francis, who is also a member of the CNBC Financial Advisor Council.
“For women, it’s building their financial confidence,” she said.
“When it comes to dollars and cents, you need to be able to take care of yourself and not 100% solely rely on a man,” she added.
Subscribe to CNBC on YouTube. More

“Spaving,” or spending more to save more, has become a dangerous habit for cash-strapped Americans amid elevated inflation and mounting debt.
Though inflation eased in April, the consumer price index was still up 3.4% from a year prior. 

Despite higher prices, Americans continue to spend.
To that point, credit card debt reached $1.12 trillion in the first quarter, according to a report from the Federal Reserve Bank of New York.

‘Consumers are hyperreactive to deals’

Retailers are increasing promotions to combat their slimmer margins. Between March 2023 and March 2024, temporary price reductions were up by 72% and overall promotions rose by 15%, according to data analytics company Numerator. Free shipping offers, “buy one, get one free” deals and order minimums are successful ways companies get consumers to “spave.”
“If you’re spending more money because now you’re focused on the deal as opposed to what you’re getting, that’s when it becomes really, really dangerous,” said Charles Chaffin, co-founder of the Financial Psychology Institute.
More from Personal Finance:Don’t be so quick to take money advice from TikTok — here’s whyAverage consumer now carries $6,218 in credit card debtThe rise of the ‘tradwife’ — why some women say they are opting out of work

The personal savings rate — or how much people save as a percentage of their income — has been on the decline as households spent down pandemic savings and stimulus checks. In April, it was 3.6%, compared to an all-time high of 32% in April 2020, according to the U.S. Bureau of Economic Analysis.
“Consumers are hyperreactive to deals because they feel like they have less money than they’ve ever had,” said Melissa Minkow, director of retail strategy at consulting firm CI&T. “It’s just a weird mix of variables that is creating this very unique retail environment.”

While spaving isn’t always negative, continuing to make unplanned, impulse purchases can have devastating effects on consumers’ long-term financial goals.  
“On a basic level, if we’re incurring debt that we can’t pay back, it’s going to affect our credit score, which is going to have a huge impact on our ability to buy a house, on financing of large purchases and whatnot,” Chaffin said. 
Watch the video above to learn more.  More

Real estate investor activity jumped 0.5% from a year ago, according to Redfin.
It’s the first increase in activity since mid-2022.
Here’s what that growth means for buyers on the market.

What an investor home purchase means

In this context, investors are defined as any institution or business that purchases residential real estate, according to Redfin. Investor purchases typically reflect buyers who are purchasing a home using a limited liability company, or LLC, another form of company or a trust, and are typically buying the home to generate income or a profit. Some intend to use the house as a part-time residence or vacation home.
Investor share refers to the portion of homes purchased by investors over a certain period, said Chen Zhao, senior economist at Redfin.

In the first quarter of 2024, the share of homes purchased by investors was 19%, according to Redfin.

“That implies that around 81% of homes, by our measurement, are being purchased by people who are not investors, so they’re probably buying their homes to make them their primary residence,” said Zhao. 
Institutional operators, or real estate investors who own at least 1,000 single-family homes, own about 1% of the total housing stock in the U.S., according to an analysis from research site ResiClub, based on data from Parcl Labs, a real estate data firm.

Gauging investor effect ‘is complicated’

In a new report, Moody’s Analytics looked on a metro-by-metro level at the relationship between investors’ share of sales and homeownership rates, or the number of households that own their homes.
“It looks like there’s a pretty weak relationship between the two,” said Matthew Walsh, assistant director and economist at Moody’s Analytics.
In other words, he said, there’s not much evidence for crowding out homebuyers from the market.  
Based on the analysis, “these investors aren’t really taking up a significant portion of the housing stock and keeping traditional family buyers from owning their homes,” he said.
Investors bought existing homes at high rates in some areas, Moody’s found, in some cases representing up to roughly one-third of purchases. But even that doesn’t necessarily point to consumer homebuyers being crowded out, Moody’s analysts told CNBC.

It’s almost impossible to measure how much of a “crowding out” effect there is on the market, said Redfin’s Zhao.
“Answering that question is really, really complicated. And it’s not something that you can do just by looking at fairly straightforward data,” Zhao said.
Part of the recent increase in real estate investor activity is due to seasonality, as more homes are typically sold during the spring, Walsh said.
Additionally, mortgage interest rates were at a lower level at the start of 2024 before picking up in April, he said.
Back in 2022, the housing market was at a peak, when home sales were high until halfway through the year, said Walsh. Sales began to decline as mortgage rates climbed, as higher interest rates affect both typical homebuyers and investors, he said.

What investor interest means for buyers and renters

If you’re a consumer buying on the market, you are competing against investors on top of other typical homebuyers, Zhao explained.
“You have to think about what investors are doing with those homes, and that’s where it gets a little bit more nuanced,” she said.

Many investors rent out single-family homes. While that may not be good for potential buyers, “it’s a positive sign” for renters because it’s boosting the area’s rental supply, Zhao said,
“People looking for those bigger rentals, having additional supply there is really important,” she said.
On the other hand, some investors buy properties that are considered uninhabitable, fix them up and then add them back into the housing supply — which is ultimately good for the housing market, she said.
“It’s very much a nuanced argument when you’re thinking about, what does investor activity mean for the housing market,” said Zhao.

Don’t miss these exclusives from CNBC PRO More